This comes up constantly, and the honest answer is: it depends on whether you're building a self-funded online business or raising venture capital. Those two paths point in different directions.
The core difference: taxed once, or taxed twice
A single-member LLC is a disregarded entity by default — the IRS looks straight through it to you as the owner, and the LLC itself pays no separate federal income tax. A C-Corp is a separate taxpayer: it pays a flat 21% federal corporate tax on its profits, and then shareholders are taxed again when profits are distributed as dividends. That second layer is the tradeoff.
The one case a C-Corp wins: venture capital and QSBS
Two reasons startups raising US venture capital almost always use a Delaware C-Corp, not an LLC:
- Investor tax complications. An LLC's pass-through income creates tax complexity for a venture fund's own investors (many of them tax-exempt or foreign), so most funds simply decline to invest in one.
- QSBS (Section 1202). The exclusion that lets founders and early investors potentially owe zero federal tax on a large chunk of exit gains only applies to qualified C-Corp stock, held for at least five years. LLC membership interests don't qualify at all.
Why we only form LLCs
We form single-member LLCs in Wyoming, USA, for a specific founder profile: solo, self-funded, running an online business, not planning a US venture-backed raise. For that profile, the LLC's simplicity and single layer of taxation is usually the better fit. If you're specifically planning to raise institutional venture capital, a Delaware C-Corp set up with a startup lawyer is very likely the right call instead — not something we form.
What we tell clients honestly
We're a filing service, not tax or legal advisers. Whether an LLC or a C-Corp is right for your specific plans is a real decision worth making with a tax professional, especially once effectively-connected income, withholding, or your home country's own tax treatment enters the picture.